No more stress?

With the bank stress tests now mercifully over (the banks passed!), the Wall Street Journal provides the interactive graphic below to stress out its readers in interpreting the results.
To be honest, I didn't really give it a fair shake - after selecting a bank and then mousing over the main part of the graphic, there were so many moving parts that a tension headache was felt quickly coming on, so, for health reasons, it was thought better to go look for a cartoon somewhere instead.

From Tom Toles at the Washington Post:
For more on the stress test results see this WSJ article - up to $75 billion more is needed.

A quite sensible graphic from CNN/Money can be found here.

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Trouble for the Consumer Price Index?

A story this afternoon notes an increase in apartment rents now that hundreds of thousands, perhaps millions, of "homeowners" are returning to their former status as renters.

Florida is a state hit hard by foreclosures, and now apartment rents there are on the rise, according to a new report released on Thursday.
...
There are several possible explanations, but Maya Brennan, research associate for the center, said that one seems particularly likely: "The number of foreclosures in Florida is pushing homeowners into the rental market."

Because demand has risen for apartments in the area, rents have gone up.

Rents seem to be on the rise in other parts of the country too. "Overall, it looks like rents have been on a slight increase," Brennan said.

This does not bode well for the inflation statistics since rental costs contribute almost one-third to the overall index. Earlier in the decade, modestly rising rental costs in combination with soaring home prices were the keys to our low-inflation, high-asset price prosperity.

Rising rental costs and falling home prices are not what the economists want these days.

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The laughter from the martini bar

A look at the growing homeless population comes in this report from USA Today. There's more than a little irony in the fact that all the former housing bubble states now have the simultaneous problems of a rising homeless rate and record numbers of unoccupied homes.

The third interview subject, Kevin Shutt, comments, "I've made Caesar salads table side, carved Chateaubriand - I can't get a job at Taco Bell."

Some details about Mr. Grondin, Mr. Marshall, and others from the video.

Jim Marshall recalls everything about that beautiful fall day.

The temperature was about 70 degrees on Nov. 19, the sky was "totally blue," and the laughter from a martini bar drifted into the St. Petersburg park where Marshall, 39, sat contemplating his first day of homelessness.

"I was thinking, 'That was me at one point,' " he says of the revelers. "Now I'm thinking, 'Where am I going to sleep tonight? Where do I eat? Where do I shower?' "

The unemployed Detroit autoworker moved to Florida last year hoping he'd have better luck finding a job. He didn't, and he spent three months sleeping on sidewalks before landing in a tent city in Pinellas County, north of St. Petersburg, on Feb. 26.

Marshall is among a growing number of the economic homeless, a term for those newly displaced by layoffs, foreclosures or other financial troubles caused by the recession. They differ from the chronic homeless, the longtime street residents who often suffer from mental illness, drug abuse or alcoholism.

The "economic homeless". Aside from the Great Depression, is that something that has ever been seen before in the U.S.?

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The last chance for fiat money

Martin Wolff writes a compelling commentary in the Financial Times about the failure of monetary policy in recent years, oddly, naming current Fed chief Ben Bernanke but not his predecessor in the process.

Central banks must target more than just inflation
Did inflation targeting fail? Central banks have mostly escaped blame for the crisis.

Just over five years ago, Ben Bernanke, now chairman of the Federal Reserve, gave a speech on the “Great Moderation” – the declining volatility of inflation and output over the previous two decades. In this he emphasised the beneficial role of improved monetary policy. Central bankers felt proud of themselves. Pride went before a fall. Today, they are struggling with the deepest recession since the 1930s, a banking system on government life-support and the danger of deflation. How can it have gone so wrong?

This is no small matter. Over almost three decades, policymakers and academics became ever more confident that they had found, in inflation targeting, the holy grail of fiat (or man-made) money.

At which point, many Monty Python fans will surely reflect on the 1975 classic and think to themselves, "Grrrrrail?"

The whole thing is actually worth reading, so most of it is appended below. It all boils down to the complaint that has been made here for years now - that economists don't get out enough and are so far detached from the real world that they are wholly incapable of effectively formulating any policy that won't end in disaster.

The fact that hubris seems to be another common characteristic of the dismal set doesn't help matters either, a prime example of which is Messr. Mishkin.

Frederic Mishkin of Columbia University, a former governor of the Federal Reserve and strong proponent of inflation targeting, argued, in a book published in 2007, that inflation targeting is an “information-inclusive strategy for the conduct of monetary policy”.* In other words, inflation targeting allows for all relevant variables – exchange rates, stock prices, housing prices and long-term bond prices – via their impact on activity and prospective inflation. Now that we are living with the implosion of the financial system, this view is no longer plausible.
No less discredited is the related view, also advanced by the Fed, that it is better to deal with the aftermath of asset price bubbles than prick them in advance. Prof Mishkin wrote that “it is highly presumptuous to think that government officials, even if they are central bankers, know better than private markets what the asset prices should be”. Today, few would mind such presumption, given the costs of the financial crises that follow asset price bubbles accompanied by big expansions in private credit.

Complacency about the Great Moderation led first to a Great Unravelling and then a Great Recession. The private sector was complacent about risk. But so, too, were policymakers.

What role then did monetary policy play? I can identify three related critiques of the central banks.

First, John Taylor of Stanford University, a former official in the Bush administration, argues that the Fed lost its way by keeping interest rates too low in the early 2000s and so ignoring his eponymous Taylor rule, which relates interest rates to inflation and output.** This caused the housing boom and the subsequent destructive bust (see charts).

Prof Taylor has an additional point: by lowering rates too far, the Fed, he argues, also caused the rates offered by other central banks to be too low, thereby generating bubbles across a large part of the world. In retrospect, for example, the autonomy of the Bank of England was much smaller than most imagined: the wider the interest rate gap vis-a-vis the US, the more “hot money” flowed in. This induced a lowering of standards for granting credit and so a credit bubble.

Second, a number of critics argue that central banks ought to target asset prices because of the huge damage subsequent collapses cause. As Andrew Smithers of London-based Smithers & Co notes in a recent report (Inflation: Neither Inevitable Nor Helpful, 30 April 2009), “by allowing asset bubbles, central banks have lost control of their economies, so that the risks of both inflation and deflation have increased”.

Thus, when nominal asset prices and associated credit stocks go out of line with nominal income and prices of goods and services, one of two things is likely to happen: asset prices collapse, which threatens mass bankruptcy, depression and deflation; or prices of goods and services are pushed up to the level consistent with high asset prices, in which case there is inflation. In the short term, central banks also find themselves driven towards unconventional monetary policies that have unpredictable monetary effects (see chart).

Finally, economists in the “Austrian” tradition argue that the mistake was to set interest rates below the “natural rate”. This, argued Friedrich Hayek, also happened in the 1920s. The result is misallocation of resources. It also generates explosive growth of unsound credit. Then, in the downturn – as the American economist, Irving Fisher, argued in his Debt-Deflation Theory of Great Depressions, published in 1933 – balance-sheet deflation will set in, greatly aggravated by falling prices and shrinking incomes.

Whichever critique one accepts, it seems clear, in retrospect, that monetary policy was too loose. As a result, we now face two challenges: clearing up the mess and designing a new approach to monetary policy.

On the former, we have three alternatives: liquidation; inflation; or growth. A policy of liquidation would proceed via mass bankruptcy and the collapse of a large part of the existing credit. That is an insane choice. A deliberate policy of inflation would re-awaken inflationary expectations and lead, inevitably, to another recession, in order to re-establish monetary stability. This leaves us only with growth. It is essential to sustain demand and return to growth without stoking up another credit bubble. This is going to be hard. That is why we should not have fallen into the quagmire in the first place.

On the latter, the choice, in the short term, is certainly going to be “inflation targeting plus”. “Out” is likely to be the “risk management” approach of the Fed, which turned out to give an unduly asymmetric response to negative economic shocks. “In” is likely to be “leaning against the wind” whenever asset prices rise rapidly and to exceptionally high levels, along with a counter-cyclical “macro-prudential” approach to capital requirements in systemically significant financial institutions.

This unforeseen crisis is surely a disaster for monetary policy. Most of us – I was one – thought we had at last found the holy grail. Now we know it was a mirage. This may be the last chance for fiat money. If it is not made to work better than it has done, who knows what our children might decide? Perhaps, in despair, they will even embrace what I still consider to be the absurdity of gold.

It's nice to see this sort of introspection - someday there will be fundamental changes, but that probably won't happen anytime soon.

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Nation ready to be lied to again?

We will find out soon enough - say, by the end of summer - whether headline writers in the mainstream financial media or those working at The Onion are correct in their assessment of the state of the U.S. economy. Here's an example of the former that appeared on the front page of Yahoo! yesterday for a few hours.
That SOLD sign is a compelling image for anyone thinking about the future. Home prices have been and continue to be at the center of our problems and their is near universal agreement that the economy won't improve until the housing market improves.

Just how does the story behind this compelling image figure that's happening?

Prepare to be underwhelmed.

8 Signs of Hope for the Economy
Are we on the brink of a rebound, or is it a false spring? Fortune looks at the evidence for an imminent recovery.

Is the economy looking up, or at least bottoming out? Lately there has been much talk about "glimmers of hope," in President Obama's words, and "green shoots," a phrase du jour used by the likes of Fed Chairman Ben Bernanke.

Meanwhile, many economists have warned about a false spring, pointing to numbers that are still getting worse, like the unemployment rate. Fortune takes a closer look at the upbeat news to assess whether how strong a case they make for an imminent recovery.

1. Housing Starts
The government reported that the overall number of housing starts fell in March, but those for single-family homes during the month came in unchanged from the February figure of 358,000.

IHS Global Insight noted that this suggests single-family home construction may be stabilizing and is "testing the bottom."

2. The Stock Market
The S&P 500 was up 9.4% in April, its biggest monthly rally since March 2000. The Wilshire 5000 Total Market Index ended the month at 8,962.96, up 849.85, or 10.48%. This is the best monthly return since December 1991, when the index was up 10.72%.

"The initiatives of the federal government and some of the improvements in the credit markets are making investors more confident," said Thomas Cowhey, chief investment strategist at Hirtle Callaghan.

3. Consumer Confidence
Preliminary figures for the Conference Board's Consumer Confidence Index showed a jump of more than 12 points during April, to 39.2. The reading, which measures consumer views on the economy, beat analyst expectations and was the highest so far in 2009.

Lynn Franco, director of the organization's research center, attributed the rise in confidence to "significant improvement in the short-term outlook."

4. Single-Family Home Prices
The S&P/Case-Shiller Home Price Indices showed that while 20-city and 10-city Composite Home Price figures declined through February 2009 (down 18.6% and 18.8%, respectively, from a year ago), for the first time in 16 months the annual decline did not set a new record.

While it signals that the market may be showing some stabilization, or at least what Chairman of the Index Committee David Blitzer called "deceleration in the rate of decline," Blitzer warned that we "need a few more months of data before we can determine if home prices are finally turning around."

Meanwhile, the Pending Home Sales Index rose for the second straight month in March and was up more than 1% over the year-ago figure. The index from the National Association of Realtors (NAR) increased 3.2% during the month, to 84.6%.

"This increase could be the leading edge of first-time buyers responding to very favorable affordability conditions and an $8,000 tax credit," wrote Lawrence Yun, the NAR chief economist.

They go on to talk about earnings, jobless claims, new orders, and credit markets arriving at no real conclusion other than the one stated in the title.

It really is hard to be swayed by stabilization in housing starts at current levels as new home construction is at such freakishly low levels, some 25 percent below the all-time population-adjusted low of 1980.

As for the stock market predicting the recovery, an important related statistic might be something like, during the Great Depression, the stock market predicted 5 of the first zero recoveries (i.e., huge bear market rallies failed to produce an "economic" recovery).

Consumer confidence rebounding from all-time lows going back more than 40 years is a good thing, but by no means sufficient for a sustainable rebound, and annual home price declines that did not set a new record for the first time in 16 months is only an indication that the rate of change in home prices is improving - from an annual rate of -34 percent to -26 percent.

Quoting the Chief Economist at the National Association of Realtors harkens back to 2005.

Haven't we learned anything in the past four years.

No, the nation's leading satirical newspaper probably has it right in their take on things.

Nation Ready To Be Lied To About Economy Again
WASHINGTON—After nearly four months of frank, honest, and open dialogue about the failing economy, a weary U.S. populace announced this week that it is once again ready to be lied to about the current state of the financial system.

Tired of hearing the grim truth about their economic future, Americans demanded that the bald-faced lies resume immediately, particularly whenever politicians feel the need to divulge another terrifying problem with Wall Street, the housing market, or any one of a hundred other ticking time bombs everyone was better off not knowing about.
In addition, citizens are requesting that the phrase, "It will only get worse before it gets better," be permanently replaced with, "Things are going great. Enjoy yourselves."

"I thought I wanted a new era of transparency and accountability, but honestly, I just can't handle it," Ohio resident Nathan Pletcher said. "All I ever hear about now is how my retirement has been pushed back 15 years and how I won't be able to afford my daughter's tuition when she grows up."

"From now on, just tell me the bullshit I want to hear," Pletcher added. "Tell me my savings are okay, everybody has a job, and we're No. 1 again. Please, just lie to my face."

Nathan Pletcher probably speaks for millions of Americans.

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Thursday morning links

TOP STORIES
• Stress Test Finds Strength in Banks - Wash. Post
• How We Tested the Big Banks - Geithner, NY Times
• Fed’s Bank Results ‘Reassuring,’ Show No Insolvency - Bloomberg
• ECB cuts a quarter percent; BoE keeps 0.5 pct rate - AP
• GM posts $6B 1Q loss, spends $10.2B in cash - AP
• House to ask B. of A..'s Lewis to testify on Merrill deal: report - MarketWatch
• Economic Crisis Raises Fears of Extremism in Western Countries - NY Times
• Google: American phenomenon and antitrust target - Reuters

MARKETS/INVESTING
• Oil Trades Near $56 After Rising on U.S. Stockpiles - Bloomberg
• Gold inches up ahead of stress tests, ETF dips - Reuters
• Treasury Yields Rise to Five-Month High - Bloomberg
• The trouble with market timing - CNN/Money
• More States Start Pension Inquiries - NY Times
• Gold: unstable metal - FT

ECONOMY
• Unemployment claims fall more than expected - CNN/Money
• Productivity Rises 0.8%; Labor Costs Up 3.3% - Bloomberg
• Retailer's mixed April sales show a cautious consumer - MarketWatch
• Reeling states hit by April tax shortfalls - CNN/Money
• Glossary of the new economics - Bing

INTERNATIONAL
• World stocks rise ahead of US stress tests results - AP
• Global Crisis ‘Vastly Worse’ Than 1930s, Taleb Says - Bloomberg
• Bank of England surprises on bonds; ECB cuts - MarketWatch
• King’s ‘Heads Up’ Awaited on Phase Two of BOE Plan - Bloomberg
• Australia's jobless rate marks surprise decline in April - MarketWatch
• Power Generation Declines: China's Recovery Lagging - China Stakes
• Gold sales cost Europe’s central banks $40bn - FT
• UN 'stunned' by scale of bail-out - BBC

HOUSING
• SC court halts thousands of home foreclosure sales - AP
• Mozilo May Stand Trial in Florida for Homeowner Abuses - TTAM
• Rich Default on Luxury Homes Like Subprime Victims - Bloomberg
• Another Sign of Foreclosure Trouble in California - WSJ

FED/TREASURY/BANKING
• The Big Banks Enabled Subprime Lenders - BusinessWeek
• Bernanke Favored Rate Cuts Tied to Bubble - Wash. Post
• Credit Risk Tumbles to Lowest Since Lehman Crisis - Bloomberg
• B of A and Bernanke: Unstressed - Bruce Krasting

INTERESTING
• Co-Anchor Is Leaving PBS Program on Business - Times
• Will Ratigan help MSNBC and hurt CNBC? - MarketWatch
• California voters likely to revisit gay marriage - LA Times
• Millionaires don't feel so rich: survey - CNN/Money

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We're all traders now...

Is this where we're headed? Where companies that handle the retirement money for millions of Americans encourage their customers to "profit regardless of market direction"?
It's hard to believe that people who don't know the difference between a mutual fund and Mutual of Omaha are going to be successfully trained to hedge their investment portfolios and short the market, but somebody is going to be making money on this new trend somehow.

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Americans are smarter than you think

This report from Reuters provides new hope that Americans may not be quite as dumb as many politicians and economists think.

Most in U.S. think economy still in trouble - survey
The majority of U.S. consumers do not think the worst of the U.S. economic crisis is behind them and plans to spend on luxury items remain low, a new survey showed on Tuesday.

Only 34.3 percent of consumers surveyed by America's Research Group said they think the worst of the crisis has passed, while 52 percent said they did not think the worst was over yet.

"The consumer still feels that they are in the bottom of this pit and they are by no means getting out of it," said Britt Beemer, founder of America's Research Group, which polls consumers on spending behavior.

It seems that the nation needs a pep-talk. Maybe something along the lines of "everyone go out and buy an SUV" that was uttered by a Federal Reserve official back around 2001.

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Misleading jobless claims data and recessions

One of the many "green shoots" that has popped up recently for the U.S. economy is the possible peaking of weekly jobless claims, what has been increasingly referred to as a "reliable" indicator for the end of recessions since 1967 when this data was first collected. The chart below, similar to the one published by CR in this item from a couple weeks ago shows the correlation.
That certainly looks promising.

With the four week moving average having dropped from almost 660,000 per week in early-April to just under 640,000 per week in last week's report, many now think that everything is falling into place for a speedy conclusion to this recession.

The stock market certainly thinks the recession is over...

This item at Voxeu by Robert J. Gordon, an economist at Northwestern who also happens to be a member of the National Bureau of Economic Research committee (i.e., the group responsible for determining the official start and end of recessions), provides an update on this relationship, going so far as to examine "false peaks" before concluding that "it is highly probable that the new claims peak has now occurred".

Naturally, that would mean that the recession, if not already over, will soon be over.

Looking at the chart above, it all makes sense - you'd think that we've reached a peak similar to that seen in previous recessions, just shy of the 1982 mark of 670,000, and that things are sure to improve from here on out.

But, that may not be the case because that chart is very misleading.

And, interestingly, it is misleading for reasons that were touched on very briefly in the Voxeu piece, but not examined further before arriving at the optimistic conclusion that the end of the recession is nigh.

How is it misleading?

The data is not adjusted for the size of the workforce.

When making that adjustment, the menacing blue line at the 2009 mark in the chart above transforms into the red line below, something that, all of a sudden, looks quite tame when compared to the same red line back during the recessions of the 1970s and 1980s.
Now, granted, the composition of the workforce has changed quite a bit over the last 30 years and we may never reach the population-adjusted peaks that were seen back then, but surely we have to come a bit closer to those peaks now that the great credit and debt orgy of the late-20th century has come to its painful conclusion.

For example, to reach the 674,000 October 1982 peak for new unemployment insurance claims, we'd have to see a figure of over a million today. To equal the February 1975 peak of 561,000 would require over 1.1 million.

That's almost double the recent peak!

Having blown past comparisons to the 1991 and 2001 recessions for virtually every other economic statistic months ago, it could be that whether jobless claims reached a peak last month isn't the most important question out there today.

Perhaps the most important questions to ask are how close we'll get to the population-adjusted highs of the 1970s and 1980s and how long it might take to get there.

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Econ Catfight!

There's nothing more fun than a cat fight between economists as the recent dust-up between two economics professors clearly demonstrates.

The subject felines are Allan H. Meltzer, the author of "A History of the Federal Reserve", and Paul Krugman, Nobel Prize winner and columnist for The New York Times.

[Note: There are two "l"s in Meltzer's first name, something that may have been involved in the heightened tension that developed yesterday.]

Naturally, the disagreement has to do with inflation, the bane of all economists everywhere.

It began with a harsh critique of monetary policy over the years by Meltzer in this New York Times op-ed on Sunday in which the commitment of the central bank was questioned when the time comes to decide between fighting inflation and bolstering employment, a choice that could come for policy makers as soon as later this year.

Meltzer writes:

Paul Volcker is now the head of President Obama’s Economic Recovery Advisory Board. Mr. Volcker and the administration’s many economic advisers are all fully aware of the inflationary dangers ahead. So is the current Fed chairman, Ben Bernanake. And yet the interest rate the Fed controls is nearly zero; and the enormous increase in bank reserves — caused by the Fed’s purchases of bonds and mortgages — will surely bring on severe inflation if allowed to remain. Still, they all reassure us that they can reduce reserves enough to prevent inflation and they are committed to doing so.

I do not doubt their knowledge or technical ability. What I doubt is the commitment of the administration and the autonomy of the Federal Reserve. Mr. Volcker was a very independent chairman. But under Mr. Bernanke, the Fed has sacrificed its independence and become the monetary arm of the Treasury: bailing out A.I.G., taking on illiquid securities from Bear Stearns and promising to provide as much as $700 billion of reserves to buy mortgages.

Here's where it gets interesting...

Some of my fellow economists, including many at the Fed, say that the big monetary goal is to avoid deflation. They point to the less than 1 percent decline in the consumer price index for the year ending in March as evidence that deflation is a threat. But this statistic is misleading: unstable food and energy prices may lower the price index for a few months, but deflation (or inflation) refers to the sustained rate of change of prices, not the price level. We should look instead at a less volatile price index, the gross domestic product deflator. In this year’s first quarter, it rose 2.9 percent — a sure sign of inflation.

Besides, no country facing enormous budget deficits, rapid growth in the money supply and the prospect of a sustained currency devaluation as we are has ever experienced deflation. These factors are harbingers of inflation.

When will it come? Surely not right away. But sooner or later, we will see the Fed, under pressure from Congress, the administration and business, try to prevent interest rates from increasing. The proponents of lower rates will point to the unemployment numbers and the slow recovery. That’s why the Fed must start to demonstrate the kind of courage and independence it has not recently shown.

Krugman thought a history lesson was in order in this item at his blog:

A history lesson for Alan Meltzer

From today’s Times:

Besides, no country facing enormous budget deficits, rapid growth in the money supply and the prospect of a sustained currency devaluation as we are has ever experienced deflation. These factors are harbingers of inflation.

Japan’s lost decade:

And the response by Meltzer yesterday afternoon:

After I published a piece in the New York Times op-ed page warning of future inflation (see: “Inflation Nation“), Paul Krugman claimed to offer me a “history lesson” on his Times blog (see his post: “A History Lesson for Alan [sic] Meltzer“).

In the piece I argued that no country with rapid money growth, a large budget deficit, and an expected depreciation of the exchange rate has ever experienced deflation, always inflation. He claims Japan’s “lost decade” as a counterexample. It is not. I am very familiar with Japan during this period—I served as honorary adviser to the Bank of Japan and met often with the then Governor Hayami. He opposed using monetary expansion, and I did not convince him that he was making a mistake. In the midst of the deflation, he raised the interest rate to avoid “sloppy” money markets. That was the wrong thing to do as several of us told the Bank of Japan at the time.

When Governor Fukui replaced Governor Hayami, he carried out the policy that I had urged Governor Hayami to follow. He bought long-term bonds.

The deflation ended, contrary to the advice of Professor Krugman, who claimed at the time that monetary policy was in a “liquidity trap” and useless. He was wrong then and he neglects that, unlike the United States today, Japan financed its excess spending from domestic saving. We have to borrow from others. The Chinese have sent several signals warning that they may be reluctant to finance our outrageously large deficits.

There is no word yet on anything new from Krugman.

Meow!!

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More cost effective to wreck than sell

The story about a Texas bank deciding to demolishing foreclosed homes in California was everywhere yesterday, but it shouldn't be that surprising - they needed a lot of work.

When they start bulldozing finished houses into the ground because they just can't sell them, then that will be real news.

Some details are provided in this report at the Wall Street Journal:

A Texas bank is about done demolishing 16 new and partially built houses acquired in Southern California through foreclosure, figuring it was better to knock them down than to try selling them in the depressed housing market.

Guaranty Bank of Austin is wrecking the structures to provide a "safe environment" for neighbors of the abandoned housing tract in Victorville, a high-desert city about 85 miles northeast of Los Angeles, a bank spokesman said.

Victorville city officials said the bank told them the cost of finishing the development would exceed what they could sell the homes for.

The bank also faced escalating city fines as vandals and squatters took over the sprawling housing project, leaving behind graffiti and drug paraphernalia, city officials said.

"It's unfortunate," said George Duran, the city's code-enforcement manager. "We would have hoped for these houses to be finished. But it's up to the owner to see what is best for them."

We've driven through that area many times on the way from Southern California to Las Vegas, a few times when the housing bubble was at its peak, and almost every time we wondered why anyone would ever pay $300,000 or more to live in Victorville.

There's also a related story in the LA Times.

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Wednesday morning links

TOP STORIES
• Bank of America May Need About $34 Billion of Capital - Bloomberg
• IMF calls for Asia to 'flood' banking system, cut rates - MarketWatch
• Bernanke's Outlook a Bit Brighter - Washington Post
• GM details plans to wipe out current shareholders - Reuters
• Freddie Pressured Over Accounting Disclosure - Wash. Post
• When Government Plays Doctor - Ron Paul
• Of Fingers And Dikes - Contrary Investor
• Monsters, Inc. - The New Yorker

MARKETS/INVESTING
• World could be moving to crude at 70$ barrel - Commodity Online
• Gold Rises as Investors Increase Commodity Holdings - Bloomberg
• Silver bullish, while a natural gas reversal looms - StockHouse
• Shiller: Investors Should Buy Stocks, Real Estate - Bloomberg
• Gold may plunge on banks’ stress-test results - Commodity Online
• Happy days - Breaking Views

ECONOMY
• Private-sector employment falls by 491,000 in April - MarketWatch
• Retail sales likely to improve, but can gains last? - MarketWatch
• U.S. Economy: Services Shrank at Slower Pace in April - Bloomberg
• As Unemployment Growth Slows, a Recovery Could Stir - NY Times
• Kraft’s macaroni cheese sales soaring - FT

INTERNATIONAL
• Europe Retail Sales Drop by Record as Recession Bites - Bloomberg
• Britons face working until 70 to help bring public debt under control - Telegraph
• PetroChina Needs as Much as $22 Billion in Financing - Bloomberg
• Buy-to-let mortgage schemes down 95pc - Telegraph
• Spain Output Falls by Record; Bankruptcies Quadruple - Bloomberg
• In Portugal, as in America, a 'Third Way' Is Reemerging - Wash. Post
• MONETARISM ENTERS BANKRUPTCY: The burden of elitism - Asia Times
• China Construction Falls as Bank of America May Sell - Bloomberg

HOUSING
• Almost One-Quarter of U.S. Homeowners Underwater - Bloomberg
• More homes get multiple offers; downturn may be nearing end - USA Today
• New Menlo Park idea to cut foreclosures - SF Gate
• Homeowners pay to sell - Star Bulletin

FED/TREASURY/BANKING
• Fed's Yellen predicts U.S. recovery to be slow - Reuters
• Bank Tests Yield Early Progress - Washington Post
• Fed's Stern: U.S. must tackle too-big-to-fail firms - Reuters
• Bernanke Warns of Danger of Credit Market ‘Relapse’ - Bloomberg

INTERESTING
• The Shire is in escrow - Bend Bulletin
• Bankruptcy Sleuths Find Cash in Receipts for Lap Dancers - Bloomberg
• Supreme Court sends back ruling on Janet Jackson - USA Today
• Birthmarks Explained - Divine Caroline

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Ben Bernanke on taking away the punchbowl

Rep. Ron Paul (R-Texas) asks Fed Chairman Ben Bernanke what he plans to do if, in the years ahead, consumer prices rise at eight or ten percent but growth is flat.

It must be hard to answer questions when they're asked by a guy who has authored a bill to abolish the organization for which you are the chairman (see H.R. 833).

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Oil and gold contest - only one week left!

Just one week remains before entries close for the latest installment of the semi-annual contest "Guess the mid-year price of oil and gold". Not much has changed since last week when this contest was first announced - oil is up a few dollars, gold is about even.
As always, the winner will receive a free one-year subscription to the companion investment website Iacono Research where the model portfolio had a year-to-date gain of just over 9 percent, as of yesterday's close. It's down a bit up a little more today.

Recall that the last contest, concluded a few months ago on December 31st, was won by Dorcas' Daddy after prices plummeted from their summer highs and bold calls of $40 oil and $680 gold bested all others as shown below.
Yours truly followed 10th and 4th place finishes in the two prior contests with somewhere around 70th place, so I'll be looking to improve on that this time around.

[Note: If I do win - which may just happen someday - it will result in bragging rights only and the second place finisher will receive the first place prize.]

The results of the last contest are shown in graphical form below.
Don't let that scale fool you - the vertical axis varies +/-66 percent around the center point while the horizontal axis varies by just +/-40 percent, meaning that, vertical distance is much greater than horizontal distance in percentage terms.

That's third place finisher Mathlete all the way out to the right at $45 oil and $1,200 gold.

Unfortunately, once oil got to below $50 a barrel, it wasn't much of a contest and the fact that crude oil traded at about $80 a barrel when the guesses were made during the financial market meltdown last October provided little solace for most.

After entries close one week from today, a new chart like the one above will be populated with all the guesses that have been received and it will be updated every other Friday until the last few weeks of June when the tension will really mount and weekly updates will be provided!

No, the tension doesn't really mount.

Well, maybe a little.

The contest is based on the combined percentage differences between the guessed values and the closing prices on June 30th, 2009 using the near-month (August) Nymex futures contract for WTI crude oil and the COMEX closing bid price for gold bullion.

Entries may be made either by posting them in the comments section of this post or sending mail to either tim-at-iaconoresearch.com or tliacono-at-yahoo.com. All entries must be received no later than May 12th, one week from today - there will be at least one more notice such as this one as a reminder and current subscribers to the investment site can win a free one-year extension to their existing subscription.

The winner will be announced on June 30th - good luck to all!

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To learn more about investing in natural resources using commonly traded ETFs, stocks, and mutual funds, see this description at Iacono Research. Or, sign up for a free trial.

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Bernanke: Economic rebound later this year

Is there any reason to think that today's forecast for the U.S. economy by Fed Chairman Ben Bernanke is any better than forecasts he's provided in the past?

From today's statement before the Joint Economic Committee:

We continue to expect economic activity to bottom out, then to turn up later this year. Key elements of this forecast are our assessments that the housing market is beginning to stabilize and that the sharp inventory liquidation that has been in progress will slow over the next few quarters. Final demand should also be supported by fiscal and monetary stimulus. An important caveat is that our forecast assumes continuing gradual repair of the financial system; a relapse in financial conditions would be a significant drag on economic activity and could cause the incipient recovery to stall.

Conditions are always expected to improve in about six months...

Even last year...

From a June 3, 2008 speech before the IMF in Spain:

Broadly speaking, the functioning of financial markets has improved of late, but conditions remain strained and some key funding and securitization markets have shown only tentative signs of recovery.
...
Overall economic growth was quite slow but apparently positive in both the fourth quarter of 2007 and the first quarter of this year. Activity during the current quarter is also likely to be relatively weak. We may see somewhat better economic conditions during the second half of 2008, reflecting the effects of monetary and fiscal stimulus, reduced drag from residential construction, further progress in the repair of financial and credit markets, and still solid demand from abroad. This baseline forecast is consistent with our recently released projections, which also see growth picking up further in 2009.

Lest anyone need to be reminded, the worst economic and financial crisis since the Great Depression occurred just a few months later.

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The new breed of bank robbers and gunmen

There is something very disturbing about the transformation from ordinary citizen to bank robber and/or gunman as described in this AP story.

Bruce Windsor lived the life of a respectable family man — father of four, deacon in his South Carolina church, youth soccer coach, a volunteer who helped build orphanages in Brazil. Then four days after his 43rd birthday, authorities say, he donned a mask, wig and sunglasses and tried to rob a bank at gunpoint.
...
Windsor, it turns out, was falling down a financial hole. A real estate investor who ran several property business, his troubles predated the recession but continued as the housing bubble burst and easy credit for businesses and consumers dried up.

Undoubtedly, with expectations having been set higher over the last ten or twenty years due to multiple asset bubbles and conspicuous consumption everywhere you looked, the responses to this economic downturn are more extreme than in the past.

After all, most people are just trying to put food on the table for their family and have no real understanding of how, in recent decades, radical changes in financial markets and in the conduct of monetary policy have affected the American culture.

Sadly, most of those individuals responsible for all these recent changes probably don't understand the impact their actions have had either.

Money troubles, specifically job losses, have also been named as possible motives in at least four of the mass shootings that have scarred the country this winter, including the deaths of 13 people and a gunman in Binghamton, N.Y., the killings of three police officers in Pittsburgh and four more plus the shooter in Oakland, Calif., and the deaths of 10 people and a gunman in south Alabama.

Bank holdups haven't grabbed the same attention, but industry figures show they go up during recessions, and experts say the pressure inevitably pushes some otherwise law-abiding people to find themselves accosting a teller at a window.

"I would expect, as the downturn continues and lasts well over a year, that we will see more and more cases like this one, of someone without a record feeling they have no options and turning to crime," said Richard Rosenfeld, a criminologist at the University of Missouri-St. Louis.

It's natural to wonder if we'd all be better off right now with a little less faux prosperity over the years - if you never knew what it was like, you couldn't miss it.

Hmmm... "falling down" a financial hole reminds me of this:

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"God wanted us to have this"

A new documentary on the Bernie Madoff Ponzi scheme will air a week from today on PBS's excellent Frontline - here's the trailer.

You'll have to go to the PBS website to hear how CPA Michael Bienes rationalized things as indicated in the title for this post - the embedded flash version couldn't be made to play here.

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Kunstler: The bottom is in

But it's not the kind of bottom you were probably thinking of:

For now, the "bottom" is in -- that is, the bottom of this society's ability to process reality. It may continue for a month of so, even after the "stress test" for banks is finally let out of the massage parlor with a "happy ending." But events are underway that are beyond the command of personalities. We're done "doing business" in all the ways that we've been used to, but we just can't get with the new program. Let's count the ways:

He goes on to talk about the end of our "revolving credit economy", "suburban living arrangement", and "happy motoring fiesta" during which the possibilities of an energy-driven World War III are discussed along with paying for things using gold and/or silver, weeds growing in Chrysler and Pontiac car lots, and the unsustainable economic model of producing Cheez Doodles and Diet Pepsi.

A great way to start your day...

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Goldman Sachs rules the world

A video to go along with yesterday's front page WSJ story($) about how New York Federal Reserve Bank Chairman and Goldman Sachs board member Stephen Friedman made an extra couple million dollars last year.

A related story in today's paper: GOP Senator Criticizes New York Fed Chairman

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Tuesday morning links

TOP STORIES
• Chrysler bankruptcy has dealers on "razor's edge" - Reuters
• Stress Test Results May Show 10 Banks Need Capital - Bloomberg
• Where Home Prices Crashed Early, Signs of a Rebound - NY Times
• Wall Street Firms Will Revert to Pre-Crisis Model, Cohen Says - Bloomberg
• Trump Baja project is turning into a legal battle of Trump proportions - LA Times
• Housing Rebound? Not So Fast - BusinessWeek
• Inflation Nation - Meltzer, NY Times
• The Bottom - Kunstler, CFN

MARKETS/INVESTING
• Oil lingers above $54 on economic recovery hopes - AP
• ETFs support gold & silver demand at Comex - Commodity Online
• Glimmers of hope push S&P 500 into positive territory - USA Today
• Is the Silver Eagle Shortage Ending? - Gold and Silver Blog
• Investing lessons we've learned - CNN/Money
• “Cognitive Dissonance” - Saut, Raymond James

ECONOMY
• Living with Less - NY Times
• Despair and the Vision of the New Economy - Time
• ‘Green Shoots’ Won’t Lead Economies Out of Woods - Bloomberg
• Debtwatch No 34: The Confidence Trick - Debtwatch
• Construction spending, pending home sales rise - AP

INTERNATIONAL
• Australia holds policy interest rate steady - MarketWatch
• China's new loan growth may decline in April - CHINADaily
• European Producer Prices Decline Most in 22 Years - Bloomberg
• UBS warns stock market rally is not a sign the worst is over - Telegraph
• Distortions in the Chinese lending environment - China Financial Markets
• Defying the Economic Odds: The World Melts Down, China Grows - Alternet
• Trichet’s ECB Unity Drive Complicated by Mixed Signs - Bloomberg
• Indicators point to China recovery - CHINADaily

HOUSING
• Despite Signs to the Contrary, Real Estate Will Get Worse - Time
• Some Still Think They Can Get Rich Quick from Real Estate - Alternet
• Housing crunch becomes literal in Victorville - LA Times
• Housing Numbers: Green Shoots or Red Flags? - CNBC

FED/TREASURY/BANKING
• Bernanke to Give Fresh Take on Economy - Time
• Major Banks Get Stress Test Results Today - Wash. Post
• Most banks tighten credit standards further - MarketWatch
• Bankers see more losses ahead - CNN/Money

INTERESTING
• Will Amazon's Kindle Rescue Newspapers? - Time
• Number of children in Japan slides to new low - AP
• “House of Sand and Fog” Home on Market for $1.9M - Zillow Blog
• iPhone or BlackBerry? Service is a major factor - Cnet

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Contributions to percent change in Q1 GDP

Here's an update to an important chart showing the contributions to the percent change in first quarter GDP in a historical context. The great American consumption machine certainly pulled up from its nosedive of late last year as indicated in the blue bars below.
The late-2008 plunge in consumer spending was the second worst six-month period since World War II, the back-to-back contributions of -2.75 and -2.99 percentage points second only to the first half of 1980 where readings of -0.45 and -5.56 were seen.

Interestingly, in 1980, the subsequent quarters saw a huge rebound in consumption. The percentage contributions in subsequent quarters were 2.72 and 3.44, as compared to the bounce in the just concluded quarter to just 1.5 percentage points.

Obviously, the second quarter reading for consumer spending will be greatly anticipated.

But, it's those red bars above - business investment - that are even more interesting.

The first quarter contribution of -8.83 percentage points, a figure that necessitated a huge increase in scale to the charts above and below, was the worst reading since -9.05 in the first quarter of 1951, which was only slightly "less bad" than exactly two years before at -10.72.

But, it was the decrease in inventories that had everyone excited last week. That big violet bar hanging below the x-axis in the chart below was big enough that many analysts thought it would require the ramping up of production in the period ahead.
That violet bar is quite large and it may cause production to increase if consumption continues to rebound, but, here's another interesting statistic - if you strip out the inventory component, the -6.04 percentage point contribution was still the second worst quarter for business investment since World War II, again, trailing only the early 1980 period at -6.34.

After these two quarters, the next worst reading for business investment ex-inventory change was just -3.82 back in the first quarter of 1949, so, these two - Q2-1980 and Q1-2009 - are real outliers in the data set.

What makes this all the more fascinating is that early 1980 was the period following Fed Chairman Paul Volcker's one-man battle against inflation. From the time he took office in August of 1979, the Fed funds rates was pushed up from just over 10 percent to 18 percent in April of 1980.

No wonder there was a recession.

In contrast, in the year leading up to the most recent contraction in GDP that looks so similar to the 1980 downturn, short-term rates moved from just over five percent to zero.

There are a great number of similarities in the economic data between 1980 and today, but the conditions are very different.

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Foreclosures, people, and their pets

I'll never forget that time, about 25 years ago, when my brother and I were renting a house in Southern California and, after deciding to go our separate ways, had to figure out what to do with a cat that we had taken care of for about year after reluctantly agreeing to take it off of the hands of a friend who could no longer do so.

Long story short - on the way in to the animal shelter, an elderly lady and about an eight year old boy stopped me and offered to take the feline off my hands, saving them some money and saving me the difficult task of venturing inside the building.

While we've heard stories for years now in California about cats and dogs being abandoned as people lose their homes and animal shelters overflowing with pets that can no longer be cared for, it should come as no surprise that a similar situation exists in the area we will call home in less than 30 days.

This report from the Bend Bulletin sounds all too familiar.

Dinner and a movie.

In the world of dating, it’s a time-honored tradition.

For Mundee Maki, it was a way to spend one last fun night with her four dogs before sending them in four different directions and moving out of her foreclosed Bend home.

“The last thing we did together was I rented ‘Beverly Hills Chihuahua,’ and all the dogs watched it with me and I bought them McDonald’s. I fed them all double cheeseburgers because it was their last night together,” said Maki, 45, who works in the deli at Ray’s Food Place in Bend. “That’s the last thing we did before I packed up the TV and moved it.”
Maki, of course, is only one of many people in the region dealing with a change in housing because of the economic downturn. According to the Deschutes County Clerk’s Office, there were 1,160 foreclosures in the county between Jan. 1 and April 30, compared with 437 in the same period last year, an increase of more than 165 percent.

Maki’s story isn’t unusual. She and her husband, Cris, bought their home on Ocker Drive in east Bend at a time when Cris had plenty of work in building, excavating, logging and snow removal, Mundee Maki said.

But a couple of years ago, the steady stream of work began to slow, then stopped altogether.

This story actually has happy ending, something that came as quite a surprise - new homes were found for three of the four dogs and the one that was dropped off at the Humane Society was eventually adopted.

We'll have to put Ray's Food Place on our list of eateries to check out.

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Coal from the credit card companies

It's easy to forget that most people never saw this economic downturn and financial crisis coming. Jobs in construction and real estate were plentiful and paid quite well earlier in the decade, though many more should have realized that what was happening was unsustainable.

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Wikinvest Wire reactivated

I've reactivated Wikinvest Wire, the automatically generated list of links to other blogs with related material that appears below most posts. After being an original member of that group a while back, it was discontinued due to a number of issues whose origins were unknown.
Since I like the concept, it is being given another whirl. If anyone sees anything funny or notices an appreciably slower load time, please let me know. Whatever problems there were with loading this blog using MS Explorer under the Vista operating system, well, they seem to have resolved themselves.

Those are the best kind of problems - the ones that fix themselves...

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What does Buffett see in the housing market?

At first glance, you'd think that these stories about comments made by Warren Buffett at last weekend's annual shareholder meeting were at odds, but they're really not.

• Buffett sees some housing market stabilization - MarketWatch
• Buffett Says He Sees ‘No Signs’ of Recovery in Housing, Retail - Bloomberg

More than anything else, how you react to the first headline above has to do with your own expectation of what might lie ahead.

For example, conditioned as most people have become over the last 20 years to expect rising asset prices, it is reasonable to think that, after stabilization, there is only one direction - UP.

Very few, presumably only the die-hard, perma-bears, would look at that first headline and think of it as being negative. Then again, are there really any developments that would be considered "positive" by die-hard, perma-bears?

The second headline splashes a bit of cold water on those who might interpret that first one as being an "all-clear" signal, though, after what the world has been through over the last nine months, "some stabilization" with "no signs of recovery" is quite good, relatively speaking.

From the first story at MarketWatch:

Berkshire Hathaway Chairman Warren Buffett said Saturday that he sees some signs of stabilization in housing markets.
...
"We see something close to stability at these much-reduced prices in the medium to lower part of the market," Buffett said.

Roughly 1.3 million households are created each year in the U.S., while about two million homes were being built a year during the recent boom, Buffett added.
At that rate, "you will run into trouble," he said.

Now housing starts are running at roughly 500,000 units a year, which means the excess inventory is being absorbed at a rate of about 700,000 to 800,000 units a year, Buffett said.

"We're going to eat up inventory. That may take a couple of years. When it gets done you will have stabilization in housing prices," Buffett predicted. "Then you will have demand for more housing starts."

You have to get pretty far down in this story to get the time horizon for this "stabilization" which, unfortunately, is measured in years, not months.

The Bloomberg report, on the other hand, provides a much more accurate assessment of how the Oracle of Omaha currently sees the world:

Billionaire investor Warren Buffett, the chairman and chief executive officer of Berkshire Hathaway Inc., said he’s seen no indication of recovery from the real estate slump that helped cause the U.S. recession.

“There’s no signs of any real bounce at all in anything to do with housing, retailing, all that sort of thing,” said Buffett, 78, in a Bloomberg Television interview before the Omaha, Nebraska-based company’s annual shareholder meeting today. “You never know for sure, even if there’s a leveling off, which way the next move will be.”

Geez! He somehow felt the need to remind people that things don't necessarily go back up after they stabilize, if and when they do stabilize.

That's quite a turnaround from the promise of that very first headline above, a fresh reminder about how the financial media can shape public opinion.

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Monday morning moon shot green shoot!

This is, without a doubt, a very interesting way to begin a Monday morning...
Warren Buffet warned about inflation over the weekend and there was more talk of buying by the Chinese, both of which have helped to send metal prices soaring - that green curve above looks like one of those credit market spreads from back in October.

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Monday morning links

TOP STORIES
• GM Bankruptcy Probable, UAW Favored Over Bondholders - Bloomberg
• BofA, Citigroup working to raise $10 billion: report - MarketWatch
• Buffett: ‘No Signs’ of Recovery in Housing, Retail - Bloomberg
• Why Congress Won't Investigate Wall Street - WSJ
• Victims: Madoff Trustee Not Looking Out for Us - New York Post
• Fat public sector sickens California - Grand Forks Herald
• How Lehman Brothers Got Its Real Estate Fix - NY Times
• The prophets of doom - Salon

MARKETS/INVESTING
• Gold firms on weak U.S. dollar, Chinese buying - Reuters
• Crude Oil Declines After Reaching Five-Week High - Bloomberg
• Stock market rally under stress - CNN/Money
• The End of Personal Finance - The Big Money
• Investment Outlook: 2+2=4 - Gross, Pimco
• Comfortable with Uncertainty - Hussman Funds

ECONOMY
• Worries Rise on the Size of U.S. Debt - NY Times
• Boston Globe could file shutdown notice Monday - Reuters
• High gas prices drive changes in fuel consumption - LA Times
• Warren Buffett: Inflation on the horizon - CNN/Money
• Falling Wage Syndrome - Krugman, NY Times

INTERNATIONAL
• Asian markets soar on economic hopes - CNN/Money
• China marriage boom to boost jewellery trade - Commodity Online
• China's manufacturing sector returns to growth, data show - MarketWatch
• EU Says Europe Economy to Shrink 4%, ‘Free Fall’ Over - Bloomberg
• Asian nations agree to form $120 billion 'liquidity pool' - MarketWatch
• Brazil Stocks Lure Most Foreign Inflows in a Year - Bloomberg
• House prices will stay in the doldrums until 2013 - Citywire
• Europe must learn from Japan’s experience - FT

HOUSING
• The Next Housing Bust - WSJ
• U.S. Home Prices May Be Lost for a Generation - Bloomberg
• Why are Opening Auction Bids Below The Loan Balance? - RCG
• Vacant foreclosed homes spawn blight, crime - SF Gate

FED/TREASURY/BANKING
• Bernanke To Face Tension On the Hill - Wash. Post
• Among Democrats, a rift over siding with banks - CSM
• Tests of Banks May Bring Hope More Than Fear - NY Times
• Treasurys flat ahead of debt sales - CNN/Money

INTERESTING
• Ancient tsunami 'hit New York' - BBC
• You Have Got Mail -- From Nigeria - Barron's
• California's Water: A Vanishing Resource - Signs on San Diego
• Do You Use an RSS Reader? - Mashable

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Googling unemployment

There's an interesting webpage at Google that was stumbled upon the other day when looking for the unemployment rates we heard on the radio last Thursday as we returned from Oregon. Here's what things look like in some of the counties we passed through.
With the exception of Calaveras County where we live now (pop. 46,000) and where we're headed to in Deschutes County (pop. 154,000), these are all in the northern most part of California with Shasta County being the largest (pop. 169,000). Not included in this graphic is Klamath County in Oregon (pop. 67,000) where unemployment is now 17.3 percent.

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Wither the I-bond?

There is something to be said for the wisdom of Will Rogers wherein the return of his money was more important than the return on his money. But, interest rates are now reaching ridiculously low levels, particularly the "inflation protected" government I-bonds, now that short-term inflation has turned decidedly negative. This WSJ report has the details.

Friday, the Treasury Department said these inflation-linked bonds that are purchased between May and October will earn 0% for their first six months, the first time rates have hit 0% since the bonds were issued in 1998. The announcement also affects current I-bond owners, whose interest rate drops to 0% the next time their rates reset.
...
Rates on I bonds, whose maturities are all 30 years, have two parts: a fixed rate, now set by the Treasury at 0.10% for new issues and which lasts for the bond's life, and the inflation adjustment, which reflects the change in the Consumer Price Index over a six-month period. Since that inflation adjustment worked out to a negative 5.56% annualized rate for the September-to-March period, the fixed-rate portion of every I bond will be wiped out during its next six-month rate period.

The good news? Rates can't go below zero.

So, even if you are a retiree whose medical expenses continue to skyrocket, whose food bill continues to rise, and whose heating bills have yet to decline, at least you won't have any less money than you started with when you cash in your bonds.

ooo

This week's cartoon from The Economist:

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Sunday morning links

TOP STORIES
• All Eyes Turn to GM And Its Bondholders - Wash. Post
• UAW wins big Chrysler stake but can't run company - AP
• Chrysler’s Fall May Help Administration Reshape G.M - NY Times
• White House Threatened To Destroy Perella Weinberg's Reputation - Zero Hedge
• Berkshire’s Munger: ‘Venal’ Banks May Evade Needed Reform - Bloomberg
• Chrysler's Bankruptcy Deals Blow to Affiliates - WSJ
• The Greatest Cost - Noland, Prudent Bear
• Three more banks fail - CNN/Money

MARKETS/INVESTING
• Gold May Be ‘Off to the Races’ Above $950 - Bloomberg
• Dollar-cost averaging can get you back into stocks - MarketWatch
• SEC Chief Schapiro Wants to Make Hedge-Fund Rules - Bloomberg
• For investors, ‘everything is in flux' - Globe & Mail
• Bill Miller sees signs of recovery - MarketWatch
• Stock market becomes harder to shock - LA Times

ECONOMY
• Preview: Joblessness Probably Rose to 25-Year High - Bloomberg
• U.S. Workers' Wages Stagnate As Firms Rush to Slash Costs - Wash. Post
• Can unemployment claims predict the end of the American recession? - Voxeu
• Colleges Flunk Economics Test as Harvard Model Destroys Budgets - Bloomberg
• Depression Scares Are Hardly New - NY Times

INTERNATIONAL
• Asia Must Do More to Fight Crisis - Bloomberg
• Russian gas output collapse deepens in April - Reuters
• Flu fears fail to scare domestic travelers - CHINADaily
• Advertising giant WPP to axe 7,200 jobs - Guardian
• Emaar Leads U.A.E. Property Shares Lower - Bloomberg
• Asian nations set up $120 billion crisis fund - AP
• Italy’s GDP May Decline 4.2 Percent - Bloomberg
• Chinese travelers get cold feet - LA Times

HOUSING
• House hunting? It's not a buyer's market everywhere - LA Times
• Buffett Sees Some Signs of Housing Stabilization - WSJ Marketbeat
• Only modest improvement in housing market foreseen - Philly.com
• Your house's true value - Baltimore Sun

FED/TREASURY/BANKING
• Citi may need $10 billion more - report - CNN/Money
• Miller: Stress Test May Push 14 Banks to Raise Money - Bloomberg
• Fed to launch program bolstering commercial loans in June - MarketWatch
• Top Senate Democrat: bankers "own" the U.S. Congress - Salon

INTERESTING
• Public pawnbroker keeps Parisians' secrets safe - Reuters
• Las Vegas is a case study of the next global crisis - Seattle Times
• Couple arrested for sex on lawn at Windsor Castle - AP
• Origin of Life: What Are the Odds? - LiveScience

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